Skip to main content

tv   Worldwide Exchange  CNBC  April 14, 2014 4:00am-6:01am EDT

4:00 am
you're watching "worldwide exchange." i'm ross westgate. the headlines today, the there is no evidence to disarm in russia. and the kremlin is hoping for a peaceful resolution in moscow east west at the security meeting. tensions weigh on investors. and u.s. earnings season is in effect with citi expected to mark the first decline in profits in over a year.
4:01 am
and a massive win caring are i a $6 billion deal for the peruvian copper operation. you're watching "worldwide exchange." bringing you business news from around the globe. and welcome. ukraine braces for military action this morning. there was no evidence that the rebels is complied. the ukrainian authorities have described this as terrorist operations and is laying the blame squarely on russia. speaking at emergency meeting at the u.n. security council over the weekend, russia's ambassador accused the government of using criminal force.
4:02 am
however, they criticized moscow saying it amasked tens of thousands of borders on the border. samantha powers also accused russia of interfering in ukraine. >> we know who is behind this and is the only entity area in the area capable of the coordinated professional military actions is russia. >> the russian stock market fell down by 1 president 6% today. the ruble weakened in early weekend due to rising tensions. the russian finance minister said moscow is not using gas to coerce ukraine. >> translator: we have a gas contract with ukraine which we signed in 2009, and it's going to last for ten years until 2019. and until recently, until 2014, all parties to this agreement have fulfilled their obligations. this agreement stipulates the price and formula for the gas
4:03 am
contract, and until recently ukraine has been paying in full all what it's due under this contract. we also provided discounts under this agreement to provide financial support to you cape. this discount agreements have terminated the discount agreements, and now the price informal, the gas should be supplied to you crain for $485 u.s. dollars per thousand cubic meters, that's about $100 higher than we sell gas to some other countries. but when we talk about other countries, we always stipulate the major shareholders of the companies that control and own gas transit systems of those countries, so gas prone generates profits from owning the gas transit systems. in ukraine, gas prone was not allowed to participate in the ownership of this gas transit
4:04 am
system. what we are seeing right now is that we need to fulfill our contractual obligations. if you think this is coercion, i disagree. and moreover, i would tell you that we're ready to discuss the financial support to the ukraine, but under several conditions. these conditions are constitutional reform that is due to be carried away in ukraine. presidential elections under the new constitution, recognition of the results of the crimea resolution and the peaceful resolution in the current situation in the eastern part of ukraine. >> do you understand, though, that the investors' perception is that russia will look to influence all of those things. and because of this, you say that you're charging $100 more than other european customers. it looks like you're trying to force that. >> translator: well, i would look at how other countries would settle this issue. i can give you some figures
4:05 am
which have already been mentioned by president putin. 35.4 billion dollars over the past four years have been provided as subsidies to the ukrainian economy. this includes the contractual damages that we did not sue them for not taking enough gas under this contract. we need to understand how further we can subsidized the ukrainian economy, but i think in this situation any other government would do pretty much the same. >> if i look at the reports of what nato is saying about russia, if i look at the talk about coercion and political tools being used, would you agree that russia is being misrepresented in the markets and in the media? >> well, i do agree with you that russia is misrepresented on the market. we didn't coerce ukraine to sign this contract. yes, there were some discounts, but they expired. and we still have this contract.
4:06 am
we wouldn't talk about coercion, talking about fulfillment of the obligations under the contract. this is no coercion. >> let's get some views, joining us is peter dixon, global econom is economist from there in london. peter, you've got earnings season starting, concerns about the strength of those, what happens when you throw ukraine into the mix? >> it's a recipe for things to get worse from the market perspective. over the course of the last few months or thereabouts, market boards have been trading a bit sideways, a bit down with not much momentum, but investors are looking which way to jump. i don't think they are going to get a lot of good news out of the earnings season. i think all the good news, ifny, is in the price. if we get intensify case out of
4:07 am
ukraine, the markets can only go one way and that's south. >> what do we make of the potential economic impact if gas is being threat upped as sort of a weapon of influence. >> well, from a short perspective, i mean, that's going to hurt europe quite badly. that's why the europeans are being fairly reluctant to pursue the aggressive sanctions, which i think the u.s. wants them to, but in the long run, of course, the sanctions, sorry, cutting off of gas, is likely to hurt russia far more than than it hurts europe, but the question is are the europeans prepared to accept that shorter pay. the answer is probably not. therefore, i don't think we're going to see any material economic impact as a result of this. unless something really gets out of control, but the markets will be a proxy for the sentiments. we could get an awful lot of
4:08 am
volatility in the meantime. >> peter stay there. we'll get the latest, joining us is amman now. what do we think happens now? >> reporter: well, the deadly the ukrainian government gave the malitias to lay down their weapons has come and gone. and there's no sign that the militias are going to heed the warning and vacate the areas they now control. in fact, we have seen quite the opposite. over the past 48 hours, they are reinforcing the positions they now control, and it is really pushing the country to the bring. the ukrainian government has offered amnesty. if they left these areas, they would not be prosecuted and they
4:09 am
would not be sought after by the government. however, that seems right now to be falling on deaf ears. the ukrainian government certainly faces a growing dilemma. it can continue to do nothing and watch more territory and more buildings fall into the hands of some of the separatist malitias backed by russia, or they can go in with force and try to reclaim these territories and buildings, but also run the risk of provoking a russian military response. now russia says that the order given by the ukrainian president to use the military to clear these areas is criminal. in fact, a former ukrainian president speaking from russia blamed the united states and the cia for pushing this up rest and pushing ukraine toward civil war. it's a very tense situation up folding across the eastern part of the country this monday morning. >> amman, thank you for that. for the very latest on the developing crisis in the ukraine and the ensuing market turmoil, head to cnbc.com.
4:10 am
you can follow the web team's live blog. right now we'll bring you up to speed with where global investors are currently feeling this morning. and with an hour and ten minutes into the trading, consumer equities are just a bit more than 8-2. decliners are outpacing the dow jones 600. and the ftse last week was down 2%. this week we are a third percent low. the dax is down a third. the micex is down 1.5%. there are a number of individual stocks worth looking at. we'll pick some of those out. kickoff with persia with shares in the red this morning. the new ceo is outlining a recovery plan saying it will cut costs and reduce the number of models that it's going to manufacture. the stock is up 3.73%. banca pop milano down 7%
4:11 am
unexpectedly rejecting a government reform over the weekend aimed to lure in new investors. the reforms would have given the institution a greater say as well as value of employee shareholders and union representatives. and antofagasta is up 1.45%. glanco is selling its interest in the mine prior to its 2013 merger with xtrada. so i'm afraid, my apologies for putting the wrong stock chart up for you. we'll start with the bond markets, treasuries down 2.62%, the lowest in four weeks. on that and below at the moment, 2.61%. the sell-off that we've got in equities at the moment, we are below 1.5%. the yields are near 3.17%. the currency markets, dollar/yen where we were last week around
4:12 am
the low 1.01 marks. we got down to $1.0130 last week. euro/dollar last thursday was up to $1.39. we are at $1.38. plenty of comments from the council say the euro continues to be strong and they will take action to weaken it. so the china fire that lower. it hasn't really happened against the dollar. meanwhile, over in asia, the nikkei down some 49 points this morning. it's a massive week for chinese data this week. sri will recap how we have kicked off. sri, good to see you. >> good to see you, too, ross. let me continue where you leftoff talking about ukraine and the deepening crisis there because that has affected sentiment out here in asia as well. broadly, a lot of risk aversion in the markets, but we have seen some beneficiaries and a move into the safety train rotation out of equities and into the relative safety of gold and also bonds. so, we saw the gold stocks
4:13 am
perform reasonably well in australia, but it wasn't enough to really backstop the broader market. s&p/asx 200, down by 1.3%. one of the worst performers. and we also saw money heading into the safety of the japanese yen as well. so remember, this correlation between the currency, between the equities market still quite strong. so strength in the yen is bad news for the broader market. depressing the exporters by implication. the nikkei 225, below 14,000 and down by about 50 points. you were talking about the data today, that's going to be absolutely critical on wednesday because that's when we get first quarter gdp from china and also investment in industrial production and retail sales. the big question is whether it will be consistent with weaker gdp, possibly weaker below that
4:14 am
7.5% target that beijing has been trying to keep growth with. if it is consistent with weaker economic activity, than has that already been priced in to the greater china market or does that mean we're going to see another second wave of selling, especially on the greater china markets? the hang seng and the shanghai if not the broader regional indices. wednesday will be a critical day, ross. back to you. >> it certainly will be. sri, catch you later. for now, thank you. other things we are looking at, citigroup reporting first quarter results at 8:00 a.m. eastern. it is forecasting a $1.81 a share. the fed rejected its capital plan and investors will also listen for comments on legal costs following vent settlements and news on the mexican unit. over all, they expect first
4:15 am
quarter earnings for the s&p 500 to decline 1.6%. the first decline since the third quarter of 2012. citigroup shares are down 12% year to date. as you say, that kicks off a big week of earnings statesidement on tuesday, coca-cola, johnson&johnson and yahoo! lead the agenda. by the middle of the week, banks are going to be back in the lineup. bank of america will be joined by tech giants google and ibm. wall street titans goldman sachs will close out a shortened week ahead of the easter break on thursday. let's get back to peter dixon. we know that this is earnings season, when are we going to see the first decline for a while, as i've said. my first question is, have we brought down forecasts enough, and actually, therefore is there room for a surprise in the upside? >> that kind of is my sense, i know that we spent much of the last three months slashing
4:16 am
earnings estimates for the first quarter. and i think the way that companies work these days is it's in their interest to depress the expectations as far as they can. i think in the hope that when the results finally do come out, they find the and lists have outdone it. so i think there's a scope for a possible outperformance there, but i think it's the backdrop of the issues we discussed earlier, the geo politics and all that. it doesn't suggest to be much of a sustainable bounce in my view. >> peter, stay there, we'll talk about the ecp and the euro. we'll bring you more of our interviews from imf's spring meeting after the break. an exclusive with the ibm chairman axle vega. and a victory lap on the back of forecasters is not yet in order. and we'll also find out why the new french finance minister has likened his country to a
4:17 am
ship in need of rescue. that interview at 7:45. that will be 10:45 ct. before that, we want to know, would you trust facebook to handle your money? we'll bring you the details of that story in our view exchange as well. more to come on the program.
4:18 am
4:19 am
4:20 am
the european central bank is easing fears on the rising euro. they asked whether credit easing may be prohibitive if it creates a credit bubble. >> we have to be aware of the potential distortions, the different measures monetary policy managers could create. we are experiencing now, we've been experiencing now for a long period of time very low interest rates. and this by itself could have financial stability implications. and so, we have to be extremely careful in how we design our monetary policy decisions.
4:21 am
because i said before that one important factor is the return of confidence, but confidence could be easily broken by serious financial stability accidents. >> he also spoke to the ubs chairman and asked him whether the ecb should provide further stimulus. >> i think it's unlikely that they will do that. if you look at the projections of the ecb, yes, inflation is below target, but that's different than deflation. if you look at the fan charts, for example, the projections the ecb publishes, that franchise is even on the lower end. 95% of it is above zero. so they know there's negative up nation in their up nation outlook. as long as that's not the case, there's no deflation risk from their side. >> were you surprised by the president of the bank
4:22 am
acknowledging that technical eqe is possible? >> no, i was not surprised that he basically didn't rule out, but that's not the same as saying i endorse it or will be part of it, so i was pretty relaxed when i read that statement. i think i've not seen a major shift in the bank's attitude or tone. i think one of the things that really has been exaggerated in the market is as if the ecb were now at the borderline committed to taking action, so i think what the ecb has said is we are not ruling out action. we are technically preparing that if we need to take that action, we have all the pieces in place and we don't need to prepare anymore. we can just embark on such an action, but that's not saying that the action is imminent. if you look at what the ecb with do to basically produce a bigger balance sheet, stop absorbing some of the liquidity out there
4:23 am
from the s&p is one of the options. and there are others like more medium to longer term refinancing operations. actually, the ecb allowed for the banks to prematurely retire some of the outstandings eto, already leading to a contraction of the balance sheet. if they didn't allow that, we probably wouldn't have seen such a coming down of the balance sheet in the first place. so they are likely to embark on other measures that are, for example, the liquidity provision toward banks, but at the same time as they run the stress test, if you're stressing the bank and want to know whether it's solvent or not, you don't want to give it liquidity before passing the test. if they are embarking on new tests for liquidity, i see those measures in connection with the stress test. the one that is are not long-term without doubt will probably be in the shorter liquidity provision rather than being able to access longer windows, those are solvent beyond doubt may be able to take
4:24 am
up longer term liquidity and that will help them expand the balance sheet. the other important work the ecb is doing is they are trying to reignite the market for ideas. not complex abas, and that's an important tool for banks to get credit exposures not sold out to market. that market has collapsed partly because of the high risk rates attached to abs. now that might be corrected for plain standard credits. and if banks can shift credit off the balance sheet and sell them in the market, they create new room for credit exposures. and that's probably a more useful challenge for the ecb to pursue to really allow banks to issue credit again if there is a demand. i think at the moment the weak credit is more of a demand phenomenon, but europe is just not the place to see a lot of investment by credit and demand. so i think it will be working out over time, but it will take some time to fix.
4:25 am
>> it's also a tiny market. and the risk is that you create distortions, isn't that prohibitive for the ecb, the risk of credit bubbles forming because of your action? >> no, and i think one of the things you have to remember is corporate debt markets and corporate debt is one of the instruments the ecb might buy. a very elaborate and deeper in germany and france than some of the peripheral countries, and some of the problematic countries in the periphery don't have corporate debt markets to any size of the market that they can buy. so once they want to embark on the instrument, the liquidity goes to the market that doesn't end up in the periphery. so all the tools was in principle usable. if you look at the nitty-gritty details, they have draw-backs. and sometimes i would say the draw-backs are equally important as the potential benefits from the tools. >> plenty more of that interview with the ubs chairman later in
4:26 am
the show including his risks on the market for investors and while they will always be playing catch-up. you can head to the website to see more on what he says is why the markets necessarily are wrong to think the crisis in europe is over. peter dix has been listening in, do you think the crisis in europe is over, pete her? >> well, i think it's changed its form, but i'm not sure it's over. for sure the crisis that the eurozone faced in 2012 appears to have receded into the past. i think it's morphed into something different. it's now a question of what's happening in the countries, can countries like italy and certainly france reform in order to remain competitive with germany. now that's not a sort of crisis to put a powder keg under the markets initially, but i think it's the kind of issue where in the long term could cause many problems for the eurozone as the
4:27 am
issues that we have seen over recent years. >> peter, good to see you. thank you for that. have a good week. peter dixon joining us from commerce bank. on facebook you can post pictures of money but soon you may be able to lay your hands out on cold, hard cash for the social networking site. the financial times suggests facebook is weeks away from getting a license in ireland for money transfers. the e-money would be available throughout europe through a process known as passporting. we want to know what non-financial company would you trust to manage your money? others in the retail business already do, like tesco. e-mail us, worldwide@cnbc.com, tweet us @cnbcwex. is there a social company you would like to handle your money or not? we'll be back with more right after this. as part of your service,
4:28 am
we did a 27-point inspection on your chevy, you got new tires and our price match guarantee. who's this little guy? that's birney. oh, i bet that cone gives him supersonic hearing. watch what you say around him. i've been talking a lot about his procedure... (whispering) what? get our everyday price match guarantee plus a $100 rebate on 4 select tires from your tire experts. chevy certified service. save you fifteen percent or more on car insurance.d everybody knows that. well, did you know pinocchio was a bad motivational speaker? i look around this room and i see nothing but untapped potential. you have potential. you have...oh boy. geico. fifteen minutes could save you fifteen percent or more on car insurance.
4:29 am
4:30 am
you're watching "worldwide exchange." bringing you business news from around the globe. >> military action in ukraine looks more likely amid evidence that pro-russian separatists have complied with the demand to disarm. and moscow is clashing with the west at the u.n. meeting.
4:31 am
the micex is lower. the u.s. earnings season is in full swing. citigroup leads a list of more than 50 s&p 500 companies set to report results. analysts expect the first quarter to mark the first decline in profits in over a year. and glencorexstrata is looking to secure a $56 billion deal in its copper. european equities are lower. the xetra tax is down.60%. the cac 40 is down .46%. the german yields are near
4:32 am
1.50%. and the dollar/yen is at 101.63. the low last week was 101.30. so we have not done a huge amount in the currency rates. meanwhile, towns in eastern ukraine are bracing for military action this morning as a kiev deadline for pro-kremlin protesters to disarm has passed with no evidence and the rebels have complied. the ukrainian authorities have described rebellion in the city and other towns around the region as terrorist operations and is laying the blame squarely with russia. speaking at an emergency meeting of the u.n. security council over the weekend, the russian ambassador accused the kiev government of using criminal force and of being russia-phobic. they continue to criticize
4:33 am
russia saying they have sent thousands of russian soldiers to the border. the micx is trading down 1.5%. and the russian finance minister was asked whether his country is being misrepresented in the media. >> translator: well, i do agree with you that russia is misrepresented in the market. we didn't coerce ukraine to sign this contract. yes, there were some discounts, but they expired and we still have this contract. so we won't talk about coercion, talking about fulfillment of the obligations under the contract. this is not coercion. >> and more broadly with regard to your intentions as far as ukraine is concerned, is there misrepresentation going on, do you believe? >> translator: i think there is some prejudice against russia, but we need to talk to the media
4:34 am
to clarify our position. as you might know, recently our president has sent a letter to the european leaders clarifying our stance on ukraine and making some suggestions as to the peaceful resolution of the crisis. >> what prejudice? where is that prejudice coming from? >> translator: i think this prejudice is generated by some countries that still believe that we need to further subsidize the ukraine an economy. if you look at the trade balance of ukraine, we see that the eu share and the customs union share are pretty much the same. they are actually equal. and while the ukraine sells to the u.s. raw materials and buys machinery and equipment with russia, it's quite different because ukraine sells the machinery and equipment to russia while receiving raw materials. it is very complicated, but we still are ready to continue working in terms of trade with
4:35 am
the ukrainian government. but if we are talking about ukraine signing a trade agreement with the european union, actually, opening a trade border for eu goods with no limits and no customs dues, we need to react to that and would probably have to close our border. we look at the situation differently. >> your economist spoke to cnbc last week and was talking about the predicted 100 billion worth of outflows saying it is not just about the political backdrop. you mentioned cry mae, too, but it's also about limit takeses in the economy, weak growth, the investment climate. so is the man responsible for promoting that message, why should people, why should international companies still invest in russia and are they protected from a tick-for-tat response as far as their countries are concerned? >> translator: yes, it is big it
4:36 am
was bigger than 2013. on the other hand, we saw nervousness due to sanctions against russia. this led to investors to withdraw their investments from russia, but we also saw russian companies and individuals, mainly public transfer against the background of their concern devaluation of ruble transferred into dollars than rubles. >> as far as your international business is concerned, there's a separation of politics and the ability to do business in russia. >> nobody will invest in politically up stable countries. we think we need to resolve the geopolitical crisis with russia and ukraine as soon as possible.
4:37 am
and i think it's visible. our foreign affairs ministry and president's office are working very closely with their foreign colleagues in order to resolve the current situation. >> all right. we have more comments coming out. the ukraine president says the kiev leadership is not against a referendum being held in the eastern ukraine at the same time as a presidential election. he's sure the majority of ukrainians in a referendum would support an independent democratic and unitary ukraine. meanwhile, anti-terrorist operations with the army will begin and the region will soon be stabilized, but the key pointer there, they are not against the referendum being held in eastern ukraine at the same time as a presidential election. let's get some views, hans
4:38 am
redeker is joining us now. hans, good to see you, how is this ukraine situation permeated itself through the currency markets? >> well, you have to look into this from the framework perspective, but as the russian president emphasizes deflation pressures around the world. this is relatively contained, but if we are going into a certain step of sanctions, that may change then. and then you have another deflati deflationary impulse, and that's important because the countries in europe are dealing with a deflationary threat. and that is europe and sweden. and we have to think about what is the adequate policy response to this deflationary threat. are we going to see a central bank especially in europe, and what type of monetary action are we going to see.
4:39 am
because we went through the various instruments you can use in monetary policy, and we find that when it comes to rates, including the policy rates, it has an effect on the policy of change. >> yet we've had these comments out as well, drawing further exchange rate would require further stimulus. kristen nyer came out this morning meaning a more competitive policy, but there's not much reaction against the dollar, anyway. why? >> you have to analyze the reason why the euro is up year-end. the euro is up substantial due to capital in-flows. the euro is up because financial institutions in europe are up from the balance sheets since failing to recycle 230 billion surplus, so that means there's
4:40 am
an offer for euro sellers. when we look at the example of what was imposed before, denmark, sweden, switzerland n all the cases this country has had to deal with capital up flow. as in the case of euro, it is a case of outflow and you need to heal the balance sheets of financial institutions to have a normal recycling process. the calculations we are currently using is the misalignment of the euro to 15 big figures, but you need to have somebody being able to sell the financial institutions and looking into domestic since they are buying silver and gold instead of american treasuries, for example. and that is keeping the euro support. >> how much is supported by flows into peripheral debt? >> that is a point, there are flows into peripheral debt, but when you look at what actually makes it the foundational
4:41 am
peripheral debt, that's local banks like the spanish bank buying spannic debt or the italian bank is buying italian. therefore, the banks that are supporting the flows coming in, so what you need to make here is look at the current account surplus and recycle it. i'll give you one example. in the case of taiwan, that's a huge account surplus with a notoriously weak rate. they are strong to recycle the 12% current account surplus. in the case of euro financial institutions simply not strong enough to deal with this sort of account surplus to recycle into the long-term process. >> hans, we'll give you more chances to talk in a second, but this is the fastest growing g7
4:42 am
economy this year. with the chance at the world bank meetings, they asked if he was still concerned that britain was playing catch-up to the likes of the united states. >> britain suffered a very deep recession in 2008/2009 when the gdp fell a lot more than many countries and twice as much as the u.s., for example, and we had a lot of problems in our banking system. so we've had to deal with those issues. we've had to work through a long-term economic plan. and that means getting on public finances in order and building the strength of our banks and making our economy much more competitive, a more competitive business, for example, and i think you're beginning to see how the plan is working. just because gdp is growing we are creating jobs, and we've got to go on working through that plan because the job isn't done and there are plenty of risks out there. we need to build a more resilient academy. >> they've got the figures wrong as far as growth is concerned but they are saying the growth
4:43 am
we are producing is consumer driven, credit driven rather than seeing exports perhaps recovering and also business investment. >> well, we do want to see more exports, we want to see more investment, business investment in the u.k. in the last year has been around 8%, which is better than some other western countries, but i'm the first to say we need more of that. we need more investment. we certainly need more exports. i think this whole western model which is borrowed money from the chinese to buy the things they make for us is not sustainable. and that's why, for example, i was in brazil earlier this week to promote britain's fast growing emerging markets, these important centers of finance and commerce for the future. >> is it just about making relationships with the likes of brazil or is there more you can do? >> you can't happen a country's trade overnight and the truth about the u.k. is we are very
4:44 am
connected into the european markets. that's where half our trade goes and we are connected into the north american markets, but whether it is with china, brazil, indonesia, mexico, we need to better connect with those markets. we also need to attract investment, not just from those countries but many other countries. and there is a success story in britain then, which is a lot of international investment that's coming to our country. i think they see we've got that stable economic plan. we've got the strong financial system. and we've also got a much more competitive place to do business, for example, our business tax has come down again into the corporation tax. 21% last week. >> you're also still promoting a message there's further fiscal consolidation to come, it's a tough message with three key elections looming. do you expect that message to get tougher delivering that message to get tougher after? >> i think the british public have understood over recent years the country got itself into a situation that it was
4:45 am
borrowing too much, and difficult decisions were required to put that right. and we've had a lot of public support for that. now, the job isn't done. and we are still carrying too high a budget deficit, our debt is too high. and not only do we need to now eliminate that deficit, but we also need to run an absolute surplus in normal times so that we bring our debt down. >> is there a benefit in the gains in the parliamentary elections in creating a road block to more europe, it actually opens the door to britain? >> well, we're fighting hard in these european elections. and i'm confident that the conservative party will do well in the elections. >> a final thought from here, hans sterling, it looks to be the upper end of the range against the euro, against the dollar, near 1.68, do you think the pound is sort of at the best levels it can get to?
4:46 am
>> well, first of all, when you look at the positioning indicators and indeed you can get the impression that sterling metals are further extended, we have to take into account the deficit in the u.k. the current account deficit which is 5.4%, but it is a very significant positive aspect. we are in a deflationary environment. and the up nation rate of 1.9% is a good thing, and i think sterling is going to stay in range for the time being, but i have not run the lines of long-term prospects and they are not support nif the sterling against the u.s. dollar is going to decline. what we are watching very much in the united states for this decline is capital group spending and that would pick up.
4:47 am
if that would pick up, we have put the emphasis on the u.s. economy to grow from the demand side and the supply side, which is very supportive for the u.s. dollar. >> hans, good to see you. hans redeker joining us this morning. thank you, hans. we have more comments out from the acting ukrainian president. he was just saying that he's not a posed to holding a referendum in the eastern ukraine along with the presidential elections on may the 25th. he said that possible referendum would be on the state structure of the country. he's also come out and said the unrest in the east is aggression of russia against our country. more on that to come. also still to come, france's prime minister says his country is a afloat but needs to get motoring. we'll bring you julia's
4:48 am
interview with michelle sopan right after this.
4:49 am
4:50 am
civic security has bought a
4:51 am
stake in btig. that was bought through the hong kong brokerage. it's the first major acquisition of a foreign competitor by a chinese brokerage. this is part of their attempt to expand operations outside the mainland. in terms of the deal not being disclosed although bx tig says it will operate as an independent unit. china san pao has agreed to buy -- sanpower for the house of fraser. and now we'll go to makiko. >> the price of 250 million pounds has been attached to the firm and fast retailing is also facing competition as a private
4:52 am
equity is sponsored by lbmh. they have 65 stores in the u.k. with more than 30 in japan. the brand is popular here in japan and in the past has collaborated with fast retail offerings joining to offer t-shirt and other items. they have seen profit over the last year with sales increasing 20%. meanwhile, fast retailing has set a goal of reaching $50 billion in sales by 2020, which is five times of what it was in fiscal 2013. with the japanese market already saturated, the firm is aggressively seeking to expand overseas. last month the firm was reported to be considering buying u.s. boundary kat thkidston, but that's reported to have fallen through. >> thank you for that, makiko. we'll talk to the finance minister in a few seconds, but
4:53 am
before that, we have more coming out from mr. lavrov in the russian foreign minister saying no russian agents are in eastern ukraine. he says it is in russia's interest that ukraine should be united and all citizens should be equal. meanwhile, the french finance minister described the country as a ship at risk of sinking. in an interview, the country is said to be afloat but needs to speed up its engine to drive growth. julia spoke to him at the spring conference and asked him about the message he wants to get across. >> translator: i came here to washington to conduct meetings, which have been good meeting, and to also explain the content of the pact of reforms called the pact of responsibility in france. this pact of responsibility, i think, is considerable for businesses in favor of businesses to reduce public spending and to implement structural reforms.
4:54 am
>> this is the point the commission is going to be asking you to accelerate reforms in the market, in particular, social security i'm sure as well, why is this government going to be any more capable of enacting reforms compared to the last government or in fact any french government in the last couple of decades? >> translator: this is very much the determination of the president. he announced at the beginning of this year his desire for the reforms to be accelerated, for them to be further integrated. it's not about changing policies, it's about going further and faster to get the quickest results. >> can i ask you both as a government and as a party how you reconnect with voters here and regain the confidence of business in france. and also, what's the message to investors right now who perhaps are skeptical about how you pass these reforms? >> translator: france could take on the image, which i quite like
4:55 am
as a ship in need of rescue. the ship is currently in a state of calling with too much deficit with an unemployment rate which isn't improving and with difficulties to implement reforms. we have been filling in the breaches which are causing the sinking. we've been doing it for two years. otherwise the boat would have sunk. no business would invest more in a sinking french ship. now the boaters are afloat and we need the engine to speed up. it has to be more powerful and the message of our pact of responsibility is a message addressed to business. >> michelle safin speaking there. now, let's get over to stefan for more reaction on that. what do you make of the comments you've been hearing? >> not really surprising, but honestly, we need to know if france is about to ask for another delay to bring back its public deficit below 3% of gdp. remember, when he was appointed finance minister two weeks ago, michelle sapin, he said france
4:56 am
will maintain the deficit reduction target, but you say so clearly that the timing would have to be discussed. now he's not saying the same thing claiming that france is not negotiating anything with brussels, and some of the top ministers of the finance ministry confirm there's no negotiations with the european commission. we will have, ross, the answer very shortly. in nine days, exactly. france will submit its updated pact of stability to the european commission. for the time being it is targeting a deficit of 3.6% of gdp this year. and 2.8% of gdp for 2015. what's's likely is frank p france will raise it to 3% maximum that it can go for 2015. there's another question, will france will able to reach the target? i don't think we'll have the answer very soon. >> stephane, thank you for that. we'll take a short break and still to come, 50/50 on the earnings beat and the s&p 500 so
4:57 am
far. which way is the season going to go? we'll preview it all coming up in a few moments. the big numbers today coming out from citigroup, coca-cola and yahoo! on tuesday. wednesday the bank of america and ibm. on thursday, goldman sachs and morgan stanley. that will be the last day of earnings because friday is good friday for the easter break. all earnings and what it means to investors coming up in the second hour of "worldwide exchange" continuing after this break.
4:58 am
4:59 am
5:00 am
this is "worldwide exchange." i'm ross westgate. here are the headlines, the military action in russia increases amidst the pro-russian separatists have complied with kiev's deadline to disarm. the ukrainian president says kiev is not against a referendum being held in the future of the state. whereas russia's foreign minister lavrov says the east must have a sale of the constitution. tensions are weighing heavily on equities. u.s. earnings season is in full swing. citigroup leads the list of more than 50 s&p 500 firms reporting this week. analysts expect the first quarter to mark the first
5:01 am
decline in profits for over a year. and glencorextrada secures a $6 billion deal for its peruvian copper operation. >> you're watching "worldwide exchange." bringing you business news from around the globe. a very good morning to you. if you are joining us in north america, welcome to the start of your global trading week here on cnbc with "worldwide exchange." we had the worst loss for the s&p 500 since june 12, the dow was down 2.2%. this morning it is currently just 4 points above fair value. the s&p 500 off 2.6%. its currently just half a point above fair value. and the nasdaq is a couple points below fair value after falls last week of 3%. european equities two hours into the trading day have followed on
5:02 am
from that. the ftse 100 is down 2%. the micex in russia off 1.5% as we continue to mop or the events in the eastern part of the ukraine. all of that pain for equities is gain for bond markets. treasury yields, 2.6% is the yield, kind of where we were at the end of last year. the lowest in four weeks. the yields are also lower across the board generally speaking here in europe as well. and the currency markets, not huge shift compared to where we were. dollar/yen slightly lower at 101.70. we were near 101.30 last year. the euro last week against the dollar was around 139. that was on thursday. here we are at 138.17. you might expect it to be a little weaker bearing in mind that all members of the ecb council are coming out to say if
5:03 am
we have a stronger euro, we need more policy to further the exchange rate would require further stimulus. a huge reaction in terms of weak anyone the euro. that's where we stand right now. a big week in asia in terms of chinese data, but they are also exposed to tensions in ukraine. sri has the update out of singapore. sri? >> a big week on monday. we get the data done, that's going to be very closely watched by the markets out here if not globally. first quarter gdp, retail sales and industrial output. the broad consensus opinion is that we are going to see numbers that are softer that are going to be consistent with growth rates around 7.2% to 7.3%, below beijing's target of 7.5%. if we see that, we could see an eject reaction but also not see much of a reaction as well because the markets are fairly anew and used to this idea of the slowdown in greater china. great china markets just ahead
5:04 am
of those numbers starting the week on fairly stable footing for the hang seng and shanghai come w composite. because of the factors you talked about, because of ukraine and the dismal showing we saw on wall street last week, interesting to see a lot of money heading into the relative safety of bonds and also gold with the gold stocks in australia shining today, but clearly not enough to prevent the broader malaise in the market. the yen has been fairly strong as well. the dollar is making a comeback as you mentioned. the nikkei 225 on the back foot below 14,000 off by 50 points. wednesday will be critical for these markets when the first quarter china data. back to you. that's where we are with global asset prices. now talent in ukraine is bracing
5:05 am
for military action. an agreement has passed with no evidence that the rebels have complied. ukrainian authorities described rebellion in towns in the region as terrorist operations and is laying blame squarely with russia. speaking at the emergency meeting of the u.n. security council over the weekend, russia's ambassador accused the kiev government of using criminal force and of being russia-phobic. the western powers continue to criticize moscow saying it's amast tens of thousands of soldiers on the ukraine border. samantha power, the u.s. representative at the u.n., is also accusing russia of interfering. >> we know who is behind this, indeed the only entity in the area capable of these coordinated professional military actions is russia. >> the russian stock market is weakening with the ruble also down in early trade following the escalation in tensions. and speaking at the imf world
5:06 am
bank spring meeting in washington, julia asked russia's finance minister whether $100 billion in capital outflows would cause problems for the russian economy. >> translator: well, it kept a lot of flow, yes, it is big, it's bigger than it was in 2013. but in the beginning of the year, it was a trend that the capital would outflow from e merging markets. and this was a global trend. on the other hand, yes, we saw some nervousness due to the sanctions imposed against russia. this led to -- this led some investors to withdraw their investments in russia, but we also saw that some russian companies and russian individuals, mainly public, transferred against the background of the certain devaluation of the ruble, transferred their savings into dollars from rubles. >> so as far as you're concerned in international business being concerned, there's a separation
5:07 am
of politics and the ability to do business in russia? >> nobody will invest in politically unstable countries. we think we need to resolve the geopolitical crisis between ukraine and russia as soon as possible. and i think it is visible that our foreign affairs ministry and the president's office are working very closely with their foreign colleagues in order to resolve the current situation. >> for the very slatest on the developing crisis in the crukrae and the impact on the investors' nerves, head to cnbc.com and cover the investors' live blog. citigroup reports first quarter results at 8:00 a.m. and forecast to say $1.80 a share. citi recently warned investors they would miss a key profitability target, return on tangible equity after the fed rejected its capital plan. investors also listen for comments on legal costs following recent sentiments and
5:08 am
news on the mexican unit. overall, they expect first quarter earnings for the s&p 500 as a whole to decline 1.6%. it would be the first such decline since the third quarter of 2012. citigroup shares are currently down 12% year to date. dan morris is president and chief investment officer at morris capital advisers and joins us with his thoughts. dan, good morning to you. as far as citi is concerned, clearly they have problem with the capital plan being rejected. but what do you want to hear from them? >> well, i certainly would like to hear that they are addressing some of the issues that the fed brought to their attention and that they will be making efforts to improve their capital structure. it's very important that major banks like this establish a sound financial footing for our economy. >> yeah, are you also interested in what the banks tell us about the consumer?
5:09 am
>> am i interested in what the citi bank is doing with the consume her? >> no, what they will say. go ahead. no, go ahead. >> what they'll say about the consumer in the united states, yes, i think that's really an important thing for not just citi bank, but banks in general reporting earnings soon. because companies here have had a tougher time generating top line growth. and a lot of that is coming from the consumer. and the lack of spending that's gone on. and so i think it is important, and maybe citi will give us a bit of an indication of how the rest of the earning season is going to go in that. >> what is your strategy going to be as we go through this earnings season? >> well, first of all, you have to understand that we look for companies that have strong growth, capability of growing a sound financial structure. so our strategy remains the same. we look for companies that are priced attractively relative to
5:10 am
the evaluation. at morris capital advisers and matter of funds, we don't look at quarter to quarter earnings but a longer term evaluation in the trends that are there. so we won't be as concerned about a slowdown in earnings right now if we see the capability for some of these companies to generate improved results as the year goes on. >> all right, we'll stay there. get a cup of coffee and come back to you in a few minutes with more thoughts on the type of companies you mean as well. dan morris from morris capital advisers. we'll take a short break and still to come, an exclusive interview with mr. weber. find out why he thinks they are getting it wrong right after this. mine was earned in korea in 1953.
5:11 am
afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve.
5:12 am
5:13 am
the european central bank is readying more monetaries into combatting the strengthening euro. julia spoke to the ecb president at a press conference in washington, d.c. and asked if the credit easy would be prohibitive or create a potential bubble. >> we have to be aware of the potential distortions, the different measures, the policy measures could create. we are experiencing now, we have
5:14 am
been experiencing now for a long period of time very low interest rates. and this by itself could have financial stability implications. and so we have to be extremely careful in how we design our monetary policy decisions. because i said before that one important factor of our recovery is the return of confidence. but confidence could be easily broken by serious financial stability accidents. >> and julia also spoke exclusively to the ecb chairman and asked him whether investors are mispricing the risk in europe. >> the market is probably too benign on some of the developments in europe. it's pricing as if the problems were behind it, but what is behind us is the bad headlines. the problems are still there. and governments need to focus on working on these problems. the ecb and the central banks
5:15 am
have done a big part of the heavy lifting up to now. going forward, the governments need to come in and basically do some of the heavy lifting themselves. >> that's two crucial issues you mentioned there. what appears to be the fundamental mispricing in risk in consult with the european zone? >> i think the market has overreacted to the debt problems, but clearly once there was overpricing and exaggeration, the market always will re-price and re-shoot. also n a normal situation, they are under shooting. so very clearly if you look at the underlying economy, the u.s. growing at 3%, unemployment coming down to 6.5%, the whole dynamics, the energy balance, adding half a percentage growth, the u.s. is the most capital-rich economy in the world, if that economy pays more than spending in the market,
5:16 am
there's something substantially wrong either with the price of u.s. debt, which i don't think is the case, or with the price of spanish debt, which is more likely the case. >> if we look at what greece has achieved in the last week raising five-year cash at 4.95%, are we going to look back on that week, is that a moment where alarge bells should have been ringing? >> i wouldn't say alarm bells, but investors are buying bonds now at prices that probably don't reflect the risk. so again, i don't want to sort of, you know, be critical of the bondish shu isis isish issuance sure we'll look back at the moment and say that was a period where the market was underpriced risk and the greek bond and the european bonds are part of that example of where we are risked with the underlying profit
5:17 am
higher. as the market learns about that, it will reprice. so the european yields will not continue to go south, but they will stabilize and be normal over the fundamentally justifiable period. we will see at the core of decision making in the parliament which is just changing in the commission which will change later in the year, there's going to be in the parliament a strong force of european voters that are actually not in favor of europe. and that will make it very difficult to have pro-european decisions done at the european parliament level. there will be more fractures and party there is. you can compare it to some of the tea party movement here where basically people make it harder to reach across the aisle and reach compromises. european compromises will be harder to do with the next parliament. and then the european stress
5:18 am
test, quality review by the ecb really stressing peripheral countries by stimulating another recession would show that some of the heeding that has happened is not yet sustainable, so there will be new tensions in some of the peripheral debt. there will be new tensions in the evaluation of bank debt and how stable european banks are. if the stress test doesn't sort of lead to any repercussions, if all of the banks easily walk that stress test, well, it will be the sort of test that isn't credible. the ecb made it clear they want a credible test, so i think we will see tensions arise there. >> we'll bring you more of that interview with the ubs chairman later in the show and find out why he thinks regulators always play catch-up when it comes to the banking sector. also, on our website, find out why he thinks markets shouldn't expect eminent action from the ecb. meanwhile, the imf has been raising concerns over deflation, jpmorgan has a different take in its latest note. the bank said the global consumer prices have hit a
5:19 am
2.5-year low on announcement to increase the global growth, increasing agricultural commodity prices as well as japan's sales tax hike as factors on that. still with us is dan morris, chief executive officer at morris capital advisers. dan, you were saying a moment ago you won't worry about quarter to quarter swings, but you look for companies to ride this out. what are you expecting to help them? >> i think one thing that is helpful right now is that the fed is going to continue with the low interest rate policy. and i think, as i continue to flow through the economy, we have generated a little bit of momentum and that will help push the top line a little bit, yes. >> okay. so what are the characteristics of a couple of the companies that you like that have the characteristics that are right? >> sure.
5:20 am
now, what we do is look for companies that have strong earnings, capability to grow and a sound financial structure. the recent additional has been michael kors. this is a company who has established a brand but has room to grow. its footprint both in the united states and global is smaller. and it's priced attractively trading with a nice growth rate in trading right near the growth rate as well. the position was put in to replace coach. a position we've held for many years. they have been a successful company and have grown well, but they have certainly hit a point where they are not enabled to generate it, that growth. they had done a lot of it globally the past few years and that story has slowed down, so what we have here is the opportunity to add a strong retailer with a sound base that can grow at a higher rate priced attractively relative to a company whose growth rate has slowed and doesn't have
5:21 am
continued growth potential and is priced relatively expensive to that. that's how we look at it within our funds. >> now the interesting thing is the buy-tick industry has had a strong year since last year. we are seeing the stocks at the bulk of the setting in the nasdaq at the moment, but do you still like gilead and why? >> yes, we do. it goes back to evaluation. both the companies have both strong portfolios and great growth potential. they have pipe line that will also add to it further down the line, and that's consistent with the idea that we don't look at short-term earnings. we look at it over a longer time periodment and even though these companies were strong last year, they are both priced attractively relative to the growth rate. so we have a company, sound financials, great opportunities, new pipeline, but our price attractively relative to the growth rate. so i think the market may be getting impatient investors the opportunity to get some of the stocks at a lower evaluation
5:22 am
with attractive industry points. >> good to see you, dan. have a good week, dan morris from morris capital advisers. a recap of the headlines, the pro separatists in ukraine ignored kiev's deadline to stand down. and tensions are leading over to leaving the european trade mixed and the european equities in the red. and citigroup is expected to report a decline in revenues as they kickoff this week's earnings season. tensions in ukraine are intensifying after protesters have posed with no action. aman, what is happening right now? >> reporter: well, not only did the pro-russian separatists ignore the deadline by the government to lay down their arms and leave the buildings
5:23 am
they have already seized in seven different cities, but they have actually taken another police station. this one not too far away from where we are, about 30 or 40 kilometers north. according to footage, we have been able to see this from the scene. the pro-russian separatists managed to storm a police station there. there's been an exchange of gunfire, molotav cook tames have been thrown as well. it's a scene repeated over the last few days with very well armed and well equipped russian backed malitias overtaking key government buildings including police stations and here the regional administration building. once they do so, they barricade themselves in. this is part of a larger political demand they have, which is wanting the eastern part of the country to break away from ukraine. they want a referendum to determine whether they should be an independent country as they call themselves or whether to join russia. right now the ukrainian government had given them a deadline up until 6:00 p.m. and
5:24 am
they wouldn't be arrested, but that has fallen on deaf yeears because they will launch a large scale reoperation to regain territories lost to the pro-russian separatists. the problem is the russian military still has 40,000 soldiers on the border. and it won't take much for them to intervene if they felt their interests were at stake. back to you guys. aman, thank you for the latest there. still to come, jpmorgan at the tail end of last week. can citigroup do better today. the european trade is weighted to the down side with decliners outpacing 8-1. [ male announcer ] when fixed income experts...
5:25 am
♪ ...work with equity experts... who work with regional experts... that's when expertise happens. mfs. because there is no expertise without collaboration. mfs. i just ah woke up today and i said i need something sportier. annnd done. ok maxwell, just need to ah contact your insurance company with the vin number. oh, i just did it. with my geico app. vin # is up to the loaded. ok well then jerry here will take you
5:26 am
through all of the features then. why don't weeeeeeeeeeee go out to the car. ok, i'll just be outside... ok, yeah. his dad is my boss. yeah. vin scanning to add a car. just a tap away on the geico app. without standard leather. you are feeling exhilarated with front-wheel drive. you are feeling powerful with a 4-cylinder engine. [ male announcer ] open your eyes... to the 6-cylinder, 8-speed lexus gs. with more standard horsepower than any of its german competitors. this is a wake-up call. ♪
5:27 am
this is a wake-up call. predibut, manufacturings a prettin the united states do. means advanced technology. we learned that technology allows us to be craft oriented. no one's losing their job. there's no beer robot that has suddenly chased them out. the technology is actually creating new jobs. siemens designed and built the right tools and resources to get the job done. now on facebook you can post pictures of money but soon you may be able to lay your hand on cold, hard cash. the financial times reports facebook is just going to make
5:28 am
cash available throughout europe through passporting. frankfurt is seeing it down right now. we want to know what financial company you would go to to trust them with your money. e-mail us, worldwide@cnbc.com. would you like a social company handling your finances? we'll be back with the headlines and a look at the australian day coming up. [ man #1 ] we're now in the approach phase, everything looking good. ♪ velocity 1,200 feet per second. [ man #2 ] you're looking great to us, eagle. ♪ 2,000 feet. ♪
5:29 am
still looking very good. 1,400 feet. [ male announcer ] a funny thing happens when you shoot for the moon. ahh, that's affirmative. [ male announcer ] you get there. you're a go for landing, over. [ male announcer ] the all new cadillac cts, the 2014 motor trend car of the year.
5:30 am
5:31 am
you're watching "worldwide exchange." i'm ross westgate. there's no evidence that pro-russian separatisted have complied with kiev's deadline to disarm. mr. lavrov says the east must have sanctions weighing heavily
5:32 am
on stocks. and more than 50 s&p 500 companies will report their earnings this week. >> you're watching "worldwide exchange" bringing you business news from around the globe. and if you're just tuning in, a warm welcome to you. we'll start the global trading week here on cnbc. the u.s. equities not doing the best. the nasdaq and s&p having their biggest weekly decline since june 2012. the nasdaq off 3% last week. right now the futures are indicating that we are going to be lower again in the stock. not by much, about 7 points or so. the s&p 500 is now 3 points below fair value, up 2.6% last year. the dow down to 2.3% currently trading 11 or 12 points below fair value with futures lower in the last hour. as have european equity markets as well. last week the ftse 100 was down
5:33 am
and now we are down .80%. we are at lows for the session here with the cac 40 down .99%. and the ftse mib is down 1.2%. what are the thoughts of some of the guests already on the channel at this early stage of the week? here's a recap. >> the borders have calmed in europe. the french boat is sailing along with everyone else, but i think it still have massive leaks. the labor market, nothing has been done about that. the size of the public sector, nothing has been done about that. the service market regulated and the bureaucracy, all these are still there. to exhilarate now it's only going to get worse. what we have at the moment is a growth scare. why do you think yields are falling so sharply, have fallen year to date so sharply? it's because the buyer is being
5:34 am
forced to recycle cash again, which means they are not lending again, and we have the winter issue in the states, is it growth or just slow, will it come back? are we actually getting a recovery going to europe? the numbers suggest it, it's a growth scare. if you look geographically while u.s. equities on average are rather more expensive than the rest of the markets, a bit more expensive than they have been historically within the eurozone or japan, evaluations continue to look very attractive. and we find a lot of attractive opportunities in the advisory. citigroup reports results at 8:00 eastern. they are forecasting $1.80 a share. they recently warned investors they would miss a profitability target and return on tangible common equity. has the fed rejected its capital
5:35 am
plan? they are also looking for comments on legal costs following settlements on the mexican unit. overall, they expect the first quarter earnings to decline 1.6%. this would be the first such decline since the third quarter of 2012. citigroup shares year to date down some 12%. now citi to date kicks off a key week of earnings besides citi we also get on tuesday coca-cola, johnson & johnson leading the agenda and yahoo!. by the middle of the week, bank of america joined by tech giants google and ibm. and wall street says goldman sachs closes out a shortened week with gm and morgan stanley on thursday. we are joined with thoughts ahead on this week, monte, thank you for joining us. what do you think citi is going
5:36 am
to say about the capital plan rejected by the fed and how they might fix it? >> well, i think you're right. instead of the earnings, which you talked about earlier coming down, more of the discussion is going to be on how the capital plan really, what qualitative issues failed and what kind of work they have to do to get back on track. and then we have to roll in to other things like growth in value to create a base for the stock price. >> yeah. besides that, you say that the large cap banks are still facing -- we have had quite a lot of good quarters for them, is this the quarter that's going to be different? >> it is. since the fourth quarter of 'so 10, we have seen the banks or markets exceed expectations in every quarter except one. this could be the second quarter we see the banks fall shy. we saw a tale of two different banks on friday with jpmorgan missing us by a dime and sealing wells fargo exceed exports by a
5:37 am
dime. so we'll see differentiation among the different banks with reform during the earnings season, but there's a number of head winds. seasonally and just independent of this quarter that will pull back on the earnings a bit. >> you think that the unfavorable earning surprises could be first in jpmorgan chase and morgan stanley. what are the issues they are facing? >> well, what we are seeing, es p specially with money-centers banks is demand off the first quarter. second is the mortgage negotiations hitting a low in the first quarter of the year. first quarter to second quarter, you will see a 20% increase with the seasonality, especially with heavy weather we have seen in the united states this year. >> on the other hand, though, the top pick going into the earnings season with wells fargo, why?
5:38 am
>> well, what we saw there is balance and pockets of earnings to bring to bear. the other thing is efficiencies. they have been able to drop expenses for the last three to four quarters, so they have been able to -- as revenues come down 3%, their expenses came down 4%. we also think that some of the super regional banks still had some leverage on the credit side. wells fargo showed that on friday as well. and then lastly, they have a nice balance between originations and servicing. so our origination comes with mortgage banking has been coming down and service income actually tripled over the last year. helping offset or at least mute some of that impact from the originations coming down so far. >> monte, good to see you. have a good week. joining us from gugenheim partners. >> thank you for having me. investors are disappointed with performance in income commodities. the ubs chairman axle was asked
5:39 am
if they are playing catchup? >> i wouldn't look at these as separate issues, just separate product lines. if you look at the equity and procedures of the fcc compliance protocol, following the rules is clear and not following the rules there's a penalty attached. i would not go through them by product that is fixed income, currencies or commodities. it's the same set of markets. regulators in the past talk about otc markets felt that the key fix that was needed for the otc markets was to move them to a central counterparty so the market could be settled. that's not the regulatory future in my view, but they are going to move it all to the equity-like environment with the rules and procedures and the
5:40 am
do's and don't's are clear to everyone and whether there's come plipliance checks. it will not be limited to equity in the future, it will create some currency so the world is changing, but it will take time to move ahead. until that is the case, we have to deal with the legacy of the markets. >> as recently as a couple months ago, i heard regulators at the european bank were watching the trade markets trying to understand exactly what happened or happens at the 4:00 p.m. fix. i find that terribly concerning that even as recently as two months regulators still don't understand the product. so again, how do we move forward or regulate the products when quite frankly we still don't understand how they work or regulators don't, at least? >> one of the areas about a certain date or time when you do a fix needs to be questioned in the first place whether that's actually a good environment. now, if you want to representative price, you can
5:41 am
take the price on average over the day or you can take the price at the end of the trading day. >> but you can still trade around it. >> yeah. >> traders can still trade around it and that's what they are accused of. >> i'm in favor of having continuous trading and actually moving trading with very high rates to automatic execution. if you move to automatic execution in the market as a continuous market, there's no need to key the borders at a certain period of time. you can do that through automative trade. when it imparks revenues, there's no impact for misbehavior. i draw the heavy market that is clean and where conduct is prudent than a market where that's not the case and basically we have to police the trading. i think it's much better to move to an equity environment where you have, again, trading is more
5:42 am
costly there. revenues are smaller there. it's a more brand new market. compliance costs are bigger, but i think the industry just has to understand that they have to make that transition. an industry doesn't make that transition and there are other regulatory groups. and at ubs we are changing and moving to that environment. all right. we have some more comments coming out from ukraine. report on reuters that at least 100 pro-russian separatists have attacked the police headquarters in the eastern ukraine. this according to a witness that has been quoted by reuters. we'll see if we get more on that. meanwhile, still to come, bubba wattson has dawned the green jacket for the second time in just three years. we'll have the masters score card coming up right after this. ♪
5:43 am
[ banker ] sydney needed some financial guidance so she could take her dream to the next level. so we talked about her options. her valuable assets were staying. and selling her car wouldn't fly. we helped sydney manage her debt and prioritize her goals, so she could really turn up the volume on her dreams today...and tomorrow. so let's see what we can do about that... remodel. motorcycle. [ female announcer ] some questions take more than a bank. they take a banker. make a my financial priorities appointment today.
5:44 am
because when people talk, great things happen. that's why i got a new windows 2 in 1. it has exactly what i need for half of what i thought i'd pay. and i don't need to be online for it to work. it runs office, so i can do schedules and budgets and even menu changes. but it's fun, too -- with touch, and tons of great apps for stuff like music, 'cause a good playlist is good for business. i need the boss's signature for this. i'm the boss. ♪ honestly ♪ i wanna see you be brave
5:45 am
afghanistan, in 2009. orbiting the moon in 1971. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. a recap of the headlines, pro-russian separatists in ukraine have called for them to stand down. the tensions are spilling into markets leaving european in the red. and citigroup will report a
5:46 am
decline in revenue as they kick off this week's earnings parade. it's been a pretty rough few weeks for the ipos missing the decline in tind seize, but that could be slowing the number of companies wanting to go to public but not stopping them entirely. seema moody is live from cnbc headquarters this morning. >> reporter: the recent market volatility has thrown a stumbling block in front of ipos. investors also appear to be more choosy as fears of stocks being overvalued are being pushed from high-fly tech and bio shares into safer sectors like utilities. there are 11 ipos expected to price this week according to reuters, these include investment banks, travel holdings and weibo, china's version of twitter. there were 29 ipos to price last month. of those, five priced above the
5:47 am
expected range and two came in below. already this month, 16 deals have come to market and just one is priced above the range while five have priced below. thompson says 85 u.s. ipos have raised $18.3 billion dollars, the moment since 2000. last week we saw several names come to market, including allied financial on thursday. the u.s. government sold 2.4 billion dollars worth of its shares of the auto lender, but allied bailed out in 2009 priced at the bottom of the range with shares falling 4% on their first day. not every company ran into trouble as bankers say there's a healthy investor appetite for consumer health care and restaurant stocks, casual dining changes saw kitchen price at the top end of its range. and shares rose 64% on friday. here's a preview of what to expect from this week's ipos. the investment form run by ubs banker ken rolusk is expected to raise $220 million when priced
5:48 am
on value to value the firm at $1.5 billion. sabre is expected to raise nearly $900 million when it prices on thursday. that would value the parent of travelocity, lastminute.com and other travel sites at $4.9 billion. sabre was bought off from american airlines in 2000 and taken private by tpg and silver link partners in 2007. weibo is expected to price its ipo on thursday looking to raise about $380 million. that would value the company at $1.6 billion. weibo which reported revenues tripling last year would be the appetizer for a bigger chinese deal expected this summer, and that would be alibaba. ross? >> we'll see what happens. did you catch any of the golf, seema? >> i did. i caught some of the games over the weekend, but i have to say, new york had some of the best weather this weekend, so i spent more time outside than inside. >> i think you deserved it.
5:49 am
it's been a hard winter. >> it has. >> so that's good to hear. talking about golf, thank you, se, ma. tiger and phil were not around for the weekend at augusta, but that didn't mean there was not excitement for the masters. bubba watson and 20-year-old jordan speif in the pairing. he was up by two shots and then bogeyed 8 and 9. tapping in per par to finish at 8 under, three shots clear of speif, he won his second green jacket in the last three years. good for you. it's also good to be king of the castle. average pay for the top ceos went to $12.9 million. the according to a study in "the new york times" conducted by the executive pay research firm
5:50 am
equilar. most pay increases came from companies whose stock performed well last year. john chambers' pay jumped 80% with kisco grow iing 83%. a break is coming, but still to come, we'll hear from russia's finance minister on the risk of capital outflows. ♪ [ male announcer ] this man has an accomplished research and analytical group at his disposal.
5:51 am
♪ but even more impressive is how he puts it to work for his clients. ♪ morning. morning. thanks for meeting so early. oh, it's not a big deal at all. come on in. [ male announcer ] it's how edward jones makes sense of investing. ♪
5:52 am
sounds in eastern ukraine are bracing more military action this morning as protesters say there's no evidence that the rebels have complied. the ukrainian authorities described rebellion asser t tert
5:53 am
operations. russia's ambassador accused the kiev government of using criminal force and being russian-phobic, but they continue to criticize moscow saying they have sent tens of thousands of soldiers to the border. >> we know who is behind this and the only entity in the area capable of these coordinated military actions is russia. >> the german government spokesman said the eu foreign ministers will discuss a threshold for the third phase of sanctions against russia has been reached. and the foreign minister spokesman also says russia could be playing a role behind the scenes in eastern ukraine. the micex in russia is down 1.6%. after the falls last week are
5:54 am
indicating that we may see further falls at the open today. the biggest weekly decline since june 2012 for the s&p and the nasdaq. the ceo coming our way is joining us from chicago. scott, where are we now? a lot of people say we have been looking for sort of a major correction to happen. it would be healthy. is that what we are starting to see or not? >> yeah, we might be seeing a little bit of it, but what we are really seeing is the investors have lost confidence in the markets. we'll go back to that payroll report with the blowoff high followed by the weak numbers coming out of china. and then where i think the world lost their mind was with the five-year auction in greece. i think that was my key that things have gone absolutely haywire with that 4.95% over subscribed to the five-year. absolutely ridiculous and then the market took some more caution on that and then wrapped
5:55 am
a red bow around it with ukraine and russia. we don't have anything here to give anybody confidence to plow into the market and start buying. so we have to wait here before, i think another 2% to 3%, before we start to see investors come back to the market. or something happen that's going to give them confidence in the short-term here. >> yeah. it's a big week with chinese open and u.s. data as well. what is going to really take your focus? >> well, i think what is going to take our focus is right now we think the equity market has been too emotional, so we are moving over to watch the ten-year and the ten-year is the truth serum as of late. right now we are pegged at 2.6 the%, but we'll watch that ten-year because we think the u.s. numbers are still not -- we are not going to be able to blame it on the weather. we are weaker here than folks think we are. i think that earnings will show us that. and i think the ten-year slowly yield terms grinds to the 250 and ultimately 2.25. so we are not as bullish on the
5:56 am
u.s. economy just quite yet. we don't think that the weather was the real reason we saw the weak numbers over the winter. and i think the earnings are going to be very important in going forward and ultimately we see the ten-year rallying or the yield breaking to the 2.25%. >> scott, always good the see you. thank you for that. have a good day and a good week as well. >> all righty. >> it's a short week of trading with good friday and the easter break as well. fitch has raised its outlook raising the reform program. tune in tomorrow as we have the exclusive interview with portugal's finance minister and find out what the government is now doing right. also, the mexican finance minister gives us an update on how his country is emerging and kidnapping capitals of the world and how they are faring. that's it for "world woid exchange." coming up next, "squawk box."
5:57 am
ny relocating manufacturing to upstate new york? i tell people it's for the climate. the conditions in new york state are great for business. new york is ranked #2 in the nation for new private sector job creation. and now it's even better because they've introduced startup new york - dozens of tax-free zones where businesses pay no taxes for ten years. you'll get a warm welcome in the new new york. see if your business qualifies at startupny.com
5:58 am
5:59 am
good morning. welcome to "squawk box." the markets prepare for a big week of earnings, more than 50 s&p 500 companies are set to report in a day. sidney group is expected. tensions are rising in ukraine. they have in the ukraine, they still do that, making the european markets nervous this morning. and we have a new masters champion. bubba finishes the tournament at 8-under to capture his second masters jacket in three years. he looked like -- whoever beats him at this point can hit it 360 yards straight every time. it's monday, april 14, 2014. "squawk box" begins right now.
6:00 am
>> good morning and welcome to "squawk box." i'm andrew ross sorkin along with joe kernan. becky quick is off this week. here's what's going on this week, several reports have been pushed to thursday since the markets are closed on friday for good friday. today we're getting citigroup around 8:00 a.m. eastern time. tomorrow, here's what is on the list, coca-cola, johnson & johnson, intel and yahoo! then on wednesday, bank of america, american express and ibm. on thursday, it's a huge day because blackstone, dupont, ge, morgan stanley, pepsico and many more on the calendar. i can't say it in one breath. here are the numbers for citigroup, the giant is expected to report a profit of $1.14 a share on revenue of $19.3 bill

16 Views

info Stream Only

Uploaded by TV Archive on